By Derek Caney
New York City (Reuters) – Adelphia Communications Corp., the troubled cable television operator facing regulatory and criminal probes of its accounting, said on Tuesday it filed for bankruptcy protection.
The filing comes after revelations of billion-dollar dealings with the founding Rigas family led to federal investigations, management changes, missed interest payments and a delisting of the company's shares from the Nasdaq stock market.
"Entering into these proceedings will enable us to fully evaluate our enterprise without the immediate pressure to sell valuable assets that may well benefit the company in the future," said Adelphia's chief executive officer Erland Kailbourne.
Adelphia, the sixth-largest U.S. cable company, said it and more than 200 subsidiaries are seeking protection from creditors in a Chapter 11 filing with the U.S. Bankruptcy Court in the Southern District of New York.
The company said it arranged a $1.5 billion debtor-in-possession loan from banks led by J.P. Morgan Chase & Co. and Citigroup to help it run its business as it reorganizes. A hearing is scheduled for June 28 to approve a portion of the financing.
Sources familiar with the matter said the approval would provide $500 million for the company immediately, with the remainder coming with the approval of a business plan for the company.
The company, which has already defaulted on $7 billion of bank debt, also said it would restructure its balance sheet to pare down its debt.
The bankruptcy filing was expected after Adelphia failed to raise enough cash from private investors, renegotiate debt terms with lenders, and sell cable assets fast enough. The company, which is based in Coudersport, Pennsylvania, was delisted by the Nasdaq stock market on June 3.
Adelphia is facing grand jury investigations in two states and a U.S. Securities and Exchange Commission probe over possible accounting irregularities.
Co-founder and former Chief Executive John Rigas and other Rigas family members resigned from Adelphia and ceded control after multibillion-dollar off-balance sheet finance deals with the family were disclosed earlier this year.
The company has been trying to sell some cable systems to stave off a cash crunch. But buyers had been wary of making a bid until Adelphia's liabilities were disclosed in a bankruptcy filing.
The company's new management further disclosed a web of dealing that included rent-free New York City apartments, a questionable timber deal and the overstatement of company cash flow, revenues and subscriber figures.
Upon approval of the financing, the company, which has 5.76 million cable subscribers, said it would continue to operate its systems without interruption. The financing would also allow the company to continue to upgrade its systems to provide services like digital cable and high-speed Internet access.
Last week, a Los Angeles city attorney threatened to revoke its license if it did not resume its upgrades. The company has 250,000 subscribers in the Los Angeles area.
The company is represented by the law firm Willkie Farr & Gallagher.
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